An empty car parking zone is seen exterior a closed JC Penney Co. store in Mt. Juliet, Tennessee, on Thursday, April 16, 2020.
Luke Sharrett | Bloomberg | Getty Images
Just a number of months into serving as interim CEO of J.C. Penney, Stanley Shashoua stated he sees indicators of development within the enterprise.
“J.C. Penney is a great American family destination, and our strength is in our storied brands and the services we provide,” he stated in a cellphone interview. “We’re seeing week-over-week improvements in the business, and we’re increasingly optimistic as we work our way through this.”
Specifically, he cited development in house items and athletic attire — two classes which have outperformed in the course of the Covid pandemic as Americans look to refresh their homes and restock their wardrobes with extra comfy clothes. More just lately, Shashoua stated, prospects have been coming to Penney for Easter attire and different formal put on — one other signal that persons are prepared to decorate up once more.
Shashoua, who is also chief funding officer of the most important U.S. mall proprietor — Simon Property Group — has been on the helm of Penney since Dec. 31. That’s when former CEO Jill Soltau abruptly left, following the department store chain’s Chapter 11 chapter submitting seven months earlier.
Simon, together with the U.S. mall proprietor Brookfield, got here to the rescue late final yr, buying practically all of Penney’s belongings out of chapter for $1.75 billion in money and debt. That included taking management of roughly 670 shops, in contrast with the greater than 800 that Penney had when it filed. For now, the corporate stated, no further store closures are being deliberate.
According to Shashoua, the seek for a everlasting CEO can be ongoing and the prospects are plentiful.
“We are taking our time,” he stated. “We’ve gotten a lot of interest from a lot of very high-quality, highly qualified people. And that’s very encouraging. People come to us and tell us they love Penney, they grew up with Penney, and they’re emotionally invested in it and have real points of view about the business.”
J.C. Penney’s troubles did not crop up in a single day. The enterprise had been stumbling for years as a result of ascent of e-commerce and what many analysts say was a failure by administration to put money into upgrading shops and fashionable merchandising. A heavy debt load and the pandemic are finally what pushed it over the sting.
After working by means of chapter proceedings, Shashoua stated the Texas-headquartered firm has emerged with a stronger stability sheet and higher liquidity, although he didn’t present figures. He stated the main focus has shifted to conserving money flowing into the coffers. It has scaled again contracts with distributors and has invested in launching extra non-public labels throughout attire and residential, he added.
“It’s a very similar approach in the initial stages that we’ve taken with all the other companies that we’ve managed to turn around,” he stated.
Simon has already helped to take a number of retailers out of chapter. Those embrace the mall-based retailers Aeropostale, Forever 21, Brooks Brothers and Lucky Brand. The latter two filed for chapter in 2020.
Simon CEO David Simon has stated his firm “made a ton of money” in its Aeropostale deal. He’s additionally instructed analysts, “We’re certainly as good as the private-equity guys when it comes to retail investment.”
In its bid to save lots of Penney with Brookfield, Simon noticed a possibility in Penney’s loyal and numerous buyer base. It additionally at one level had a Penney store in about 50% of its U.S. malls, based mostly on one analyst’s evaluation, which additionally possible spurred the owner’s curiosity in investing to keep away from additional store closures at its personal procuring facilities.
Simon Property shares are up greater than 33% this yr. It has a market cap of $42.7 billion.
Simon’s retail offers typically contain collaboration with the worldwide model proprietor and licensing firm Authentic Brands Group, who can be now enjoying a job in reviving J.C. Penney.
Shashoua stated a few of ABG’s attire manufacturers, like Forever 21 and Juicy Couture, are going to be added to Penney’s merchandise assortment in shops and on-line. “2021 is more about rebuilding the company, and I think 2022 you’re going to see good growth,” he stated.
For Penney, classes of focus in coming months embrace house items, males’s merchandise in big-and-tall sizes, girls’s merchandise in inclusive measurement ranges, and child and youngsters gear, based on Shashoua. He additionally desires to develop on-line commerce, which now represents about 20% of Penney’s gross sales.
To be certain, Penney’s path to worthwhile development, successful again prospects, and gaining market share in key classes like attire and footwear will not come simply.
Consumers have more and more steered away from suburban malls, and particularly in the course of the pandemic. Many have shifted their buying on-line to the good thing about e-commerce giants like Amazon and Walmart. Clothing gross sales even have been hampered in the course of the well being disaster, as Americans have been spending a lot much less time getting dressed as much as get out.
Spending by U.S. shoppers on clothes and footwear tumbled 48% yr over yr final April, when many retail shops that promote attire and equipment had been shut for the total month, based on a monitoring by Coresight Research. More just lately, spending within the class has ticked again up, rising 0.8% in January, Coresight stated.
Last yr, together with Penney, department store operators Neiman Marcus, Stage Stores, Lord & Taylor and Century 21 filed for chapter.
Penney hopes to keep away from the destiny of the enduring department store chain Sears. Since submitting for chapter in 2018, Sears has slowly been whittling down its store footprint to turn out to be a fraction of its former self.
“We’re strengthening our retail fundamentals, with a focus on modern retail, digital, and an engaging customer experience,” Shashoua stated. “Retail is evolving faster than ever … and so our goal is to execute swiftly.”